catania/cheh letter to ag re recordationtax

8/6/2019 Catania/Cheh Letter to AG Re RecordationTax

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~COUNCIL OF THE DISTRICT OF COLUMBIA

THE JOHN A. WILSON BUILDING1350 PENNSYLVANIA AVENUE, N.W.

WASHINGTON, D.C. 20004

August 4,2011Irvin B. Nathan

Attorney General for the District of Columbia441 4th Street, NWWashington, DC 20001Dear Attorney General Nathan:

Thank you for your reply to the request for a legal opinion to analyze and determine,"whether the Tax Clarity Act required collection of recordation tax on the whole debt at the timeofrefinance for purchase money deeds of trust or mortgages."! We hope you will understandour surprise and disappointment when we received your letter dated July 25, 201 i, as it barelyaddressed the question posed to your office, but discussed at great length a separate question:whether the District of Columbia should consider "litigation to reassess prior payments to seekadditional amounts of tax on past recordations." In taking this detour, your office unexpectedlyutilized non-legal analysis by equating the plain meaning of the law and its legislative history, as

well as completely ignoring relevant case law on the subject. 2 In short, your legal opinion in

response to the question posed was not a legal opinion at all in that it failed to apply well

accepted legal principles, as one should expect from the Office of the Attorney General.Therefore, we are again requesting a clear statement from your office, supported by

appropriate legal authority, to the following question only:"Does the Tax Clarity Act require that the real property recordation tax

apply on the entire indebtedness for a refinanced deed of trust or mortgage(whether it be in the form ofa new deed of trust or mortgage, an amended andrestated deed of trust or mortgage or other documentation of similar import) if theoriginal indebtedness was securd by a corrunercial purchase money mortgage or

i See Letter from Councilinember David Catania to Attorney General Irvn Nathan, dated June 30, 201 i, attached asExhibit A.2We notice that your letter failed to make any mention of 1137 1 rjh Street Associates, Limited Partnership v. Districtof Columbia, 769 A.2d 155 (2001). We can only assume that, since your letter concedes that the plain language ofthe statute is clear that the recordation tax on the full amount of indebtedness was due, that there was no need toaddress this case law in support of that conclusion. Nevertheless, as the question presented in the June 2SiIi letterwas to determine if the recordation tax should have been imposed, we nd the absence of any discussion of 113719'h Street Associates to be conspicuous.

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purchase money deed of trust that was exempt from recordation taxes under D.C.

Code Section 42-1 102(5)?''

As further clarification, we are only asking for a legal opinion on refinances of purchase moneydeeds of trust or mortgages on commercial property, not residential property, and we make theassumption that recordation taxes were not paid on the original indebtedness. For purposes ofbrevity, we will hereafter refer to commercial purchase money deeds of trust and commercialpurchase money mortgages as simply, "purchase money loans".Your July 25, 2011 Response

Your July 25th letter appears to answer the question in the preceding paragraph in theaffirmative - i.e. you state, "(0 Jur plain reading ofthe Act, particularly as compared with itsformer language, suggests that the recordation tax should be assessed on the full amount of theindebtedness, to the extent that no recordation tax was paid on the original indebtedness."However, you then go on for pages about contrary legislative history and address arguments that"could be made" if the District were to decide to collect these taxes. This analysis is used toexcuse the OTR's disregard of the plain meaning of the law, but, in fact, this analysis raises evenmore difficult questions.

In order to be clear as to what we are asking of you, we think it is important to addresssome aspects of your July 25th letter which caused us particular concern.

. Plain MeaningWhile your July 25th letter states that a "plain reading of the Act" requires the collection

of recordation tax on the entire indebtedness, you muddy the waters by suggesting thatlegislative intent can outweigh the plain meaning of the law. In doing so, you offer a torturedaccount of the actual legislative history of the Act. As a co-author of this letter was one of thefour co-introducers of the Act, we disagree with your characterization of the legislative intentand note that your discussion of it is unnecessary in light of the fact that the plain meaning of thestatute is clear.

It is well established that, when the statutory language is plain and unambiguous, thestatute must be enforced according to its terms.3 Put another way, courts "must presume that(the) legislature says in a statute what it means and means in a statute what it says there.',4 Hadyour analysis understood this basic legal tenet, or had it been supported by appropriate statutory

law or case law, there would likely be no need for a further request. But the remaining aspects ofyour J wy 25th letter open a door that should have been shut by your "plain meaning" analysis andJ See, e.g., Dodd v. United States, 545 U.S. 353, 359 (2005); Lamie v. United States Trustee, 540 U.S. 526, 534(2004); Hartford Underwriters Ins. Co. v. Union Planters Bank, N. A., 530 U.S. 1,6 (2000); Caminetti v. UnitedStates, 242 U.S. 470, 485 (1917); see also; District of Columbia v. Gallagher, 734 A.2d 1087, 1091 (D.C. 1999).4 Dodd, supra at 357 (quoting Connecticut Nat'l Bank v. Germain, 503 U.S. 249, 253-54 (1992)); See also BedrocLtd. v. United States, 541 U.S. 176, 183 (2004).

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must now be clarified. This is a consequence of an analysis that does not appreciate that itshould "not resort to legislative history to cloud a statutory text that is clear.,,5

. Legislative History

For reasons which are unknown to us, the conclusion to the section titled, "the Act," fromyour July 25th letter, ends with, "(b)ut that is not the end of the matter for, as you know, whencourts interpret legislation they do not end their analysis with the plain language, particularlywhen the interpretation or implementation of the agency differ from that reading and whencontrary legislative history is available." (Emphasis added.) Yet you cite no real evidence ofcontrary legislative history, but instead proffer several "arguments that could be made" tosupport the notion that the legislature's silence on this particular provision of the Act equals acontrary legislative history.

First, neither the Attorney General, nor the District's Chief Financial Officer ("CFO"),should attempt to decipher the intent of the legislature when the law is clear.6 Second, alegislature's silence does not constitute a contrary legislative history. Third, the legislativehistory of this Act is not silent on this matter and the preponderance of evidence in the legislativehistory that relates to the mortgage recordation tax expressly recognizes the effects that thechange in the plain meaning of the law would have on the commercial real estate community; 7namely, that it would require the collection of taxes on the full amount of purchase money loans

during a refinance.That the Council chose not to respond to the concenis raised by members of the

commercial real estate community in writing does not mean it was unaware that a change to thelaw would have negative tax implications on this community (and therefore, generate additional

tax revenue for the District of Columbia, which was one of the primary reasons for passage ofthe Tax Clarity Act). There is no requirement that "every permissible application of a statute beexpressly referred to in its legislative history.,,8 Furthermore, had you done even a cursory

reading of the Council's Committee Report on the Act, you would know that not every changeproposed by the Act was discussed at length, as the Report addresses just a few of the manychanges that would occur from its passage.

S See also Ratzlafv. United States, 510 U.S. 135, 147-48 (1994) which states"... (courts) do not resort to legislativehistory to cloud a statutory text that is clear."6 See e.g., INSv. Cardoza-Fonseca, 480 U.S. 421, 452-53 (1987) (concurring), wherein Justice Scalia explains:"Judges interpret laws rather than reconstruct legislators' intentions. Where the language of those laws is clear, weare not free to replace it with an unenacted legislative intent."7 See the testimony of the D.C. Land Title Association and the testimony of the Apartment and Office BuildingAssociation in the memorandum dated September 28, 2000, titled, "Report on Bill 13-586, "Tax Clarity Act of2000" (the "Report"), which is set forth in my letter to you of June 30, 20 i l.l Moskal v. United States, 498 U.S. 103, i 1 1(1990); .See also, Pittston Coal Group v. Sebben, 488 U.S. 105, 115(1988) ("It is not the law that a statute can have no effects which are not mentioned in its legislative history.").

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Finally, the arguments that could be made in opposition to the retroactive collection ofthe tax are of no consequence because they all relate to answering a question that has not beenasked. Nothing in the request to you asked about the permissibility of retroactively collecting thetax. And in general, arguments that could be made are not contrary evidence as they are"arguments that could be made," and not, "arguments that are made" in the legislative history.Theoretical arguments do not rise to the level of "contrary legislative history," so furtherdiscussion of these issues is irrelevant to the question of whether or not the Act requires thecollection of these taxes.

. Application of the Act

While your discussion of the legislative history is unwarranted and irrelevant, we are far

more troubled by your review of the application of the Act and the conduct of the CPO after itspassage. You treat two emails, neither of which even states the statute in question, as "policystatements," even though you concede there is no evidence that the content of these emails was

ever disseminated to the public.9 You rely on "anecdotal evidence," but state nothing about whatthat evidence is. You assume facts to be true about the CFO's actual implementation of the Actthat are still in doubt. Most troubling, however, is that if the tax was collected between 2001 and2007, you have overlooked the most disconcerting aspect of this issue - that the CFO, at his soleand absolute discretion, stopped collecting a tax that OTR had purportedly collected for sixyears, without notification to the Council, the Mayor, or the general public and certainly withouta change in the widerlying law.

As your letter acknowledges. after passage of the Act. OTR issued two memoranda to thegeneral public, title insurance companies, abstractors and attorneys stating that the recordationtax would be assessed on the entire amount of the indebtedness on the refinance of purchasemoney loans. You then make an assumption that, "it appears that the recordation tax on the full

amount of the refinancing was collected in accordance with the interpretation set forth by the(Recorder of DeedsJ in 2001 during the period between the effective date of the Act and mid-year 2007." The CFO has repeatedly been asked whether or not the tax was ever collected, andif it was, during what period and when did the collection cease. The responses from the CFOhave been inconsistent at best, and outright contradictory from one another at worst.

In the CFO's initial response to Councilmember Catania in a letter dated June 24, 201110and in his response to Councilmember Evans in a letter dated June 22, 2011, i i he contends thatthe Act did not change the application of the law on refinancing of purchase money loans andthat, "OTR has since continued to consistently administer the law so as to maintain the9 Although one of the emails was sent to an individual outside the CFO's Office, there is no evidence that it wasdisseminated to the larger public or characterized as a revised legal interpretation sufficient to change District taxlaw.10 See Exhibit B.i i See Exhibit C.

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exemption for the refinance of purchase money mortgages.,,12 As he stated in his letter toCouncilmember Evans, "(i)n fact, the purpose of the amendment was to clarify existing law thatprovided for this very same refinance exemption.,,13 At the time, the only conclusion that couldhave been garnered from Dr. Gandhi's response is that there had been no change to the way thelaw had been administered after the passage of the Act.

Because Dr. Gandhi's response was in direct contradiction to the two memoranda fromOTR to the general public in 2001, the CFO was asked in a letter dated June 30, 2011,14 toprovide written evidence of the retraction of the 2001 memoranda or evidence that the policystated therein had never been implemented. In Dr. Gandhi's response to this request on July 8,2011,15 he references an internal email :from July 2007, more than six years after passage of theAct, that contained two sentences, without statutory reference or any suggestion that theimplementation of the law had ever been different, that stated only new amounts on purchasemoney loans are taxable under District law. Dr. Gandhi described this email as, '"the basis forimplementing a revised policy and procedure of the Recorder of Deeds with'respect to thetaxation of refinances." 16 He provided no written evidence establishing a revision to theRecorder of Deeds' policies and procedures. Nor did he provide evidence that the public was

ever notified that the policies dictating how recordation tax would be calculated were changing.Cleverly, and despite specific requests, the CFO has never stated to the Council that the

OTR, at any time, collected recordation taxes on the full amounts of refinanced of purchasemoney loans. But, his statements and your letter have left us to draw one of two conclusions:either Dr. Gandhi never implemented the changes mandated by passage of the Act and theDistrict of Columbia has not collected untold millions of dollars which it should have since 2001,OR; the Act was correctly implemented between 2001 and 2007 until Dr. Gandhi, unilaterallyand without notice to the Council, the Mayor or the general public, ceased collecting a tax that hewas required to collect under the Act. We would suggest to you that neither of these conclusionsis remotely acceptable and that the latter is likely a breach of Dr. Gandhi's duties and represents

a massive legal liability for the District.17

Additional Questions

We will continue to press the CFO to deliver concrete evidence to the Council so that wecan make a determination of what the practice of his office has been with respect to this tax overthe last ten years. However, in addition to a responsive legal opinion from you to the initialquestion, we also request from you a legal opinion on the following matters:12 See Exhibit B, p. 1.13 Ibid., p.2.14 See Exhibit D.15 See Exhibit E.16 Ibid.17 Presumably, under this scenario, taxpayers who paid recordation taXes between 200 I and 2007 based on the 2001guidance issued by the Recorder of Deeds will seek remedies from the District for their payment of these taxes.

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(1) Does the Chief Financial Officer have legal authority to set forth a "policy" which, bythe application of such policy, is contrary to the plain reading of a law?(2) Does the Chief Financial Officer have the legal authority to unilaterally change the

application of the law as a "policy" decision, without notice to the Councilor theMayor?It is our fervent belief that application of the recordation tax laws and the amounts which shouldbe collected are not policy decisions. We believe that the law, depending on which version of thetruth from Dr. Gandhi we accept, has either never been implemented by OTR or that the law was

implemented by OTR and Dr. Gandhi made a choice to stop collecting the recordation tax

without consulting the Councilor the Mayor, or asking for a change in the underlying statute.It is our hope that a revised legal opinion addressing only the question of whether or not

the Act requires the collection of the taxes on the full amount of purchase money loans and thepreceding questions relating to the authority of the CFO to set or change tax policy regardless ofthe plain meaning of the law can be delivered to our offices no later than September 6, 201 1, sothat we can take this matter up expeditiously when the Council is back in session on September15,2011.

Sincerely,

t4(Jr MaryChehCouncilmember, Ward 3Chair, Committee on the Environment,Public Works and TransportationCouncilmember, At -LargeChair, Committee on Health

cc: Mayor Vincent C. GrayDr. Natwar M. Gandhi, Chief Financial OfficerAll Councilmembers

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catania/cheh letter to ag re recordationtax

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